The China-EU consultation mechanism is a model for institutionalized dispute management

Editor's note: Yang Hangjun is a professor and executive dean of the Graduate School of Excellence of the University of International Business and Economics. This article reflects the author's views and not necessarily those of CGTN. It has been translated from Chinese and edited for clarity and brevity.

The Second Regular Meeting of the China-EU Trade and Investment Consultation Mechanism, held in Beijing from October 8 to 9, concluded with a consensus document outlining 16 outcomes. Crucially, this list transforms disputes into procedural matters that are negotiable, trackable, and reviewable, thereby facilitating successive rounds of dialogue. Launched in Brussels on June 29, the mechanism encompasses trade and investment balance, export controls, intellectual property rights, and WTO reform, with one-to-two ministerial-level meetings scheduled annually. The electric vehicle (EV) case best exemplifies this procedural approach: In January, the EU issued guidance allowing eligible companies to offer price undertakings as an alternative to countervailing duties — a process reaffirmed at the recent meeting. While substantive disagreements persist, a clear pathway for managing them has been established. For both sides, the priority is now to accelerate the implementation of existing consensus while maintaining communication on outstanding differences.

For businesses, the primary benefit of this framework is the introduction of predictability into policy shifts. Establishing manufacturing facilities, obtaining certifications, and building distribution networks in Europe require substantial upfront investment and high asset specificity; sudden regulatory changes risk rendering these sunk costs. The resulting delays, declining orders, and inventory backlogs ultimately drive up corporate costs and disrupt planning. With China-EU goods trade reaching 4.2 trillion yuan ($616 billion) in the first eight months of this year — an 8.1% increase — the volume is simply too significant to withstand frequent policy volatility. On a deeper level, the procedure itself constrains unilateral action. Item 14 of the outcomes explicitly states that under the Export Control Dialogue Framework, both sides will provide advance notification before listing items, enhance transparency in listing and de-listing procedures, and support de-listing processes within their respective legal frameworks. While contingent on implementation, such advance communication enables business adjustment and raises the political cost of sudden escalation.

These guardrails extend beyond the bilateral relationship. Item 12 specifies that China will continue facilitating export licenses for rare earths and permanent magnets to the EU via a "green channel," while the EU will facilitate key licensing cases for dual-use items destined for China. Greater predictability in critical inputs reduces redundant stockpiling and duplicative investment, benefiting third-country supply chains as well. Such certainty is particularly invaluable today. The WTO recently raised its 2026 global merchandise trade growth forecast to 3.9%, more than doubling the March projection of 1.9% and reversing earlier pessimism triggered by tariff shocks. This dramatic reversal underscores that stable expectations have become the scarcest public good in the current climate.

Nevertheless, realism is warranted: Mechanisms cannot substitute for concrete action, and EU protectionist legislation continues to advance. The Carbon Border Adjustment Mechanism entered its definitive phase earlier this year; the proposed Industrial Accelerator Act seeks to introduce "EU-origin" thresholds in public procurement and local content requirements for major foreign investments; and just before the regular meeting, the EU signed a joint statement with the US and 14 other economies on "structural overcapacity and overproduction." Though China was not named explicitly, the intended target is evident. In this sense, the mechanism functions as a deceleration device, reducing miscalculation and preventing specific disputes from escalating rapidly. Its effectiveness will depend on critical milestones ahead: The ministerial video conference in January 2027, the Third Regular Meeting in March, and whether EV price undertakings can be expanded to cover more companies and models. At this juncture, "manageable competition — rivalry without rupture" represents both the most desirable and realistic expectation for China-EU relations.